Viewpoint: What is Driving Africa’s Low Insurance Coverage?

It has been established that only about five per cent to six per cent of Africa’s estimated 800 million people, excluding South Africa, has access to insurance services.

The low insurance penetration in Africa may be analysed from two perspectives: the structural economic perspective and the demand and supply considerations.

The famous Peruvian development economist, Hernando de Soto, has established that developing countries are characterised by non-representation of substantial assets in recognised formats such that their financial value could be capitalised. Such assets could in principle be protected with insurance coverage. In effect, such potential assets structurally remain outside the scope of insurance and the owners of such assets being the majority of Africans remain without insurance on their assets.

Conversely, African insurers are practically barred from covering such risks and must contend with providing insurance for only assets in the formal sector.